"The minister holds the Australian government responsible and demands an apology and payment of compensation. If this does not happen he will reconsider trade agreements between the two countries," his spokesman Muhammed Hanoun told Reuters.
The shooting took place outside the trade minister's offices in Baghdad's Harthiya district. Iraqi police said it appeared that the Australians mistook the bodyguards, who were dressed in civilian clothes and armed with AK-47 rifles as insurgents and opened fire.
The Australian defence force has confirmed that its soldiers opened fire killing one and wounding three people. Other reports said three bodyguards and two civilians were wounded in the shooting.
In a statement, the Vice Chief of the Australian Defence Force (ADF) Lieutenant General Ken Gillespie admitted to the mistake, "The ADF deeply regrets the injuries and loss of life that has occurred. As with all ADF incidents of this nature the matter will be formally and fully investigated."
An Iraqi interior ministry spokesman has said that the soldiers were protecting an Australian trade delegation, when they opened fire on the bodyguards as they left the Iraqi minister’s compound.
But according to a spokeswoman for Australian Trade Minister Mark Vaile, there was no delegation. She says the Australian soldiers were assigned to protect visiting Australian trade official Greg Hull, usually based in Jordan.
"The security detachment was conducting routine security duties in association with a regular visit to Baghdad by Australia's STC (Senior Trade Commissioner) to Iraq," the spokeswoman said.
Adding that "At the time of the incident the senior trade commissioner was not with the security detachment” but the spokeswoman did not know where Mr Hull was when the shooting occurred. It is understood that the soldiers may have been conducting reconnaissance at the time of the shooting.
The focus of Mr Hulls trip was likely to have been rebuilding Australia’s wheat trade with Iraq, in the wake of the AWB scandal which saw the exporter pay almost $300 million in kickbacks to Saddam Hussein’s regime.